What Plans Do You Have for Long-Term Care?


When my father passed away in 2013, my brother and I realized that my mom was not going to be able to continue to live in our family home and take care of herself on her own.

We had the agonizing process of having to find a new home for her, a place that we knew would be best suited to her mobility and medical needs. After many hours of discussion with my brother, and numerous tours of facilities in the area, we settled on a facility that wasn’t too far from either of our homes. I know that my brother and I are not alone in having to face the dilemma of deciding on long-term care options for a loved one. Maybe you are finding yourself in the same situation now, or perhaps you are beginning to have concerns regarding your parents or another family member. Industry statistics indicate that approximately one person in six will spend time in a skilled nursing facility, with the average stay ranging between eighteen months and four years. What are your options? How do you prepare ahead of time for all the various possibilities?

You may never need care, but what if you did? How would that affect your family? Many baby boomers are unwilling to face the possibility of something that they think may never occur. If you do need care, how will you pay for it? There are three possible answers to the question.

Medicaid: Relying on some form of government assistance, such as Medicaid, will require becoming impoverished in the eyes of the government. The look back period for Medicaid is currently 5 years, but that could change at any time, especially with the constant budget maneuvers in Congress. Some may be eligible for assistance from Veteran’s Affairs, if they quality, but there is a means testing to that as well.

Long-term Care/Nursing Home Insurance: Purchasing Long-term Care/Nursing Home insurance has been an option since the 1970s, when Fireman’s Fund Insurance pioneered the category of long-term care. The fact that Fireman’s Fund no longer exists is a testament to the difficulty insurance companies have in properly pricing their product and maintaining the reserves necessary to fund the liabilities. Until about twenty-five years ago, the options for obtaining coverage were limited to annual premium type policies. You could pick coverage with different benefit periods and different deductible periods. The policies were either reimbursement or indemnity benefits, with some offering return of premium. The return of premium option existed because people wanted a choice to get their money back if the insurance wasn’t used. That’s understandable, isn’t it?

It is not uncommon for insurance companies today to make available coverages funded with a lump sum of money. A key feature of this type of coverage is the beneficiary option, in the event the insurance is not used, and there are several providers offering this type of coverage. Some are only available with after tax dollars, while others are available for use with IRA dollars. It is always a good idea to examine all your options when considering funding potential coverage for long-term care. Keep in mind that newer policies which are compliant with the Pension Protection Act, allow distributions from long-term care to be tax free if used for long-term care costs. This can be a significant savings.

It can sometimes feel daunting to wade through all the variables and possible options when it comes to handling long-term care needs, concerns and expenses. Whether you decide to pay for potential expenses out-of-pocket or would like to investigate insurance based solutions, please contact me to assist you with your decision-making process.